Mental Aspects of Negotiations

What is “perception” in the context of negotiation?

“Perception” is the process by which individuals connect to their environment, by ascribing meaning to messages and events. This process is strongly influenced by the perceiver’s current state of mind, role and comprehension of earlier communications.

“Perceptual distortion” is a common phenomenon in negotiations. A perceiver’s own needs, desires, motivation and personal experiences may create a predisposition about the other party. This can lead to biases and errors in perception and subsequent communication.

• An example of perception distortion is “stereotyping”, which occurs when one individual assigns attributes to another solely on the basis of the other’s membership in a particular social or demographic category. This tendency is commonly revealed during conflicts involving values, ideologies, and direct competition for resources.

• Another important perception distortion is “halo effects”, which occur when people generalize about a variety of attributes based on the knowledge of one attribute of an individual. The tendency is most common when there is very little experience with a person along some dimension, the person is well known, and when the qualities have strong moral implications.

• Another tendency, known as “selective perception” occurs when the perceiver singles out certain information that supports or reinforces a prior belief and filters out information that does not confirm that belief. Selective perception relates closely to confirmation bias.

• Yet another perception distortion is “projection”, which occurs when people assign to others the characteristics or feelings that they possess themselves. Projection usually arises out of a need to protect one’s own self-concept— to see oneself as consistent and good.

What is “cognitive framing” in the context of negotiation?

A “cognitive frame” is the subjective mechanism through which people evaluate and make sense out of situations, leading them to pursue or avoid subsequent actions. Ury, Brett, and Goldberg (1988) proposed an approach to framing disputes that view parties in conflict as using one of three frames:

• Interests-based frames ̶ People are often concerned about what they need, desire, or want. People talk about their “positions,” but often what is at stake is their underlying interests.

• Rights-based frames ̶ People may also be concerned about who is “right”—that is, who has legitimacy, who is correct, or what is fair.

• Power-based frames ̶ Negotiations resolved by power are sometimes based on who is physically stronger or is able to coerce the other, but more often, it is about imposing other types of costs – economic pressures, expertise, legitimate authority, and so on.

Other common characterizations of cognitive frames include:

• Substantive frame – This is a focus on what the conflict is about. Parties taking a substantive frame have a particular disposition about the key issue or concern in the conflict.

• Outcome-based frame – This is a party’s predisposition to achieving a specific result or outcome from the negotiation.

• Aspiration frame – This is a focus on satisfying a broader set of interests or needs in negotiation.

• Process-based frame – This is a focus on how (the process by which) the parties will go about resolving their dispute.

• Identity-based frame – This is a focus on how the parties define “who they are.”

• Characterization-based frame – This regards how the parties see and define the other parties.

• Loss–gain frame – This regards how the parties define the risk or reward associated with particular outcomes.

It is difficult to know what frame a party is using unless the party tells you. An individual’s frame through which they interpret communication may create or be the source of biases. Negotiators can use more than one frame at a time. Mismatches in frames between parties are sources of conflict. Parties negotiate differently depending on the frame. Particular types of frames may be used with certain types of issues or lead to particular types of agreements. Parties are likely to assume a particular frame because of various factors, and a frame may change throughout a negotiation. For example, the negotiation context clearly affects the way both sides define the issue and conversations that the parties have with each other about the issues in the bargaining mix.

What are mental models of negotiation?

Mental models are the ways in which people understand social and physical systems. While frames concern how individuals receive and process information, a mental model concerns how individuals approach a situation. That is, it is the mental predisposition that results from a number of influences, such as their mental frame or their cognitive biases. Negotiators’ mental models shape their behavior in the negotiation process. Five distinct mental models of negotiation include:

⁃ Haggling Model – This is a competitive mindset where each negotiator tries to obtain the biggest share of the bargaining zone. This is often characteristic of a competitive approach to negotiations that may employ a power-based or interest-based view of the negotiation.

⁃ Cost-benefit analysis (Decision-making model) – This is a logic-based model that draws more heavily upon a collaborative strategy used to expand the potential value available.

⁃ Game-playing model – This is characteristic of a competitive bargaining strategy in which one party seeks to maximize their value by outmaneuvering the other party.

⁃ Partnership model – Negotiators who build rapport to nurture long-term relationships and often make sacrifices to uphold the relationship. This is characteristic of a collaborate negotiating strategy.

⁃ Problem-solving model – This model seeks to come to a firm, logical outcome that resolves any conflicts. It is generally marked by a collaborative or accommodative strategy.

What are some common examples of cognitive biases in negotiation?

• Erroneous fixed-pie beliefs – Negotiators often assume that all negotiations are distributive in nature. That is, the interest at stake is finite or a fixed sum and the counter-party’s interests are directly and completely opposed to one’s own. This erroneous perception leaves no ability for integrative settlements and mutually beneficial trade-offs. Negotiators assume interests are incompatible, that impasse is likely, and that issues are settled one by one rather than as packages. Negotiators thus fail to work to create additional value in the negotiation.

• False conflict (also called illusory conflict) – A situation in which conflict does not exist between people, yet they erroneously perceive the presence of conflict. The “lose-lose” effect is the tendency for negotiators to settle for outcomes that both prefer less than some other readily available outcome. Parties can avoid lose-lose agreements by being aware of the fixed-pie perception and avoiding making premature concessions

• Irrational escalation of commitment – Individuals tend to look backwards to allow prior actions to influence future conduct. An “escalation of commitment” is the tendency for an individual to make decisions that stick with a failing course of action. Escalation of commitment is due in part to biases in individual perception and judgment. If a course of action is failing, the resources invested should not influence a decision to invest additional resources when the probability of success is low.

• Overconfidence – This is the tendency of negotiators to believe that their ability to be correct or accurate is greater than is actually true. Overconfidence has a double-edged effect. It can solidify the degree to which negotiators support positions or options that are incorrect or inappropriate. It can also lead negotiators to discount the worth or validity of the judgments of others. This, in effect, shuts down other parties as sources of information, interests, and options necessary for a successful integrative negotiation.

• Egocentrism – This bias, a type of “tunnel vision”, is a high degree of self-focus in any situation or interaction. An egocentric individual will focus primarily on her own interests and objectives with little concern for those of other parties. This tendency is characterized by an inability to empathize or an unwillingness to entertain the views or interests of others. An individual can develop an egocentric output based upon cognitive heuristics (biases), poor inter-social development, or informational disparity (availability and recognition).

• Self-serving biases – People often explain another person’s behavior by making attributions, either to the person or the situation. Perceptual biases are often exacerbated by the actor-observer effect in which people tend to attribute their own behavior to situational factors but attribute other’s behaviors to personal factors. Self-serving biases effect the negotiation process in a number of ways, such as: the perception of greater use of constructive tactics than the other party; less accurate in estimating the other’s preferred outcomes; and influences perception of fairness in a negotiation context.

• Issue framing bias – A frame is a perspective or point of view that people use when they gather information and solve problems. The positive/negative framing process is important because the same offer can elicit markedly different courses of action depending on how it is framed in gain–loss terms.

• Information availability bias – Availability bias operates when information that is presented in vivid, colorful, or attention-getting ways becomes easy to recall, and thus also becomes central and critical in evaluating events and options. The availability of information also affects negotiation through the use of established search patterns.

• The winner’s curse – This is the tendency of negotiators, particularly in an auction setting, to settle quickly on an item and then subsequently feel discomfort about a negotiation win that comes too easily.

• Endowment effect – The endowment effect is the tendency to overvalue something you own or believe you possess. The endowment effect can lead to inflated estimations of value that interfere with reaching a good deal.

• Reactive devaluation – Reactive devaluation is the process of devaluing the other party’s concessions simply because the other party made them. Reactive devaluation leads negotiators to minimize the magnitude of a concession made by a disliked other; reduce their willingness to respond with a concession of equal size; or seek even more from the other party once a concession has been made.

Misperceptions and cognitive biases typically arise out of conscious awareness as negotiators gather and process information. The best way to manage the negative consequences of misperception is to be aware that they occur.

How do perceptions of entitlement and fairness affect a negotiation?

Individuals generally seek fairness in their relationships with others. In the context of negotiation, parties will seek fairness in the negotiation process (“procedural fairness”) as well as in the outcome of the negotiation (“substantive fairness”). As such, an issue arises as to what is fair with regard to the process and allocation of resources or benefits from a negotiation. There are several commonly-accepted theories or approaches to the pursuit of fairness.

• Equality Rule – This approach seeks to afford all parties to the relationship an equal share to any resources or interests at stake or subject to division.

• Equity Rule – The equity rule focuses on the contribution of all parties to the situation or relationship. It posits that a party should receive a share or resources or benefit with regard to their interest or objectives in accordance with the value that she contributes to the situation. How a contribution is valued may vary given the context of the situation, but always concerns the importance or criticality of the contribution to total benefits obtained.

• Needs-based Rule – This is a charitable approach positing that a party to a situation should receive a share of the resources or benefits based upon her level of need. The party that needs the resources or benefits the most would be entitled to the greatest share. The question becomes, at what point is a party’s need met so that other parties can receive a portion of the resources or benefits. These theories of fairness are particularly important in purely distributive negotiation, where the pie cannot be enlarged and the negotiation is inevitably a (win-lose).

6. How does “social comparison” influence perceptions of fairness, and how can its effects be mitigated?

In determining what is fair, the nature of the relationship between the parties is particularly important. A negotiator will subconsciously undertake a process known as “social comparison”, which evaluates the negotiator’s social standing with regard to the other party. That is, is the counterparty a colleague (or equal in status), superior, or subordinate? A negotiator may take on a more needs-based approach in negotiations with superiors and subordinates. Negotiations with individuals of equal status are often marked by the equity rule. It may give rise to increased competition or tension in the negotiation with the objective of improving one’s position in relation to another’s. A negotiator in a superior social position may seek to reduce this emotional response to the disparity in a number of manners:

• Alter the Inputs – Alter any of the factors identified as affecting the negotiation. This may include altering the context of the negotiation, the timing, etc. If the negotiator is unable to actually alter the inputs, she may seek to alter the counterparty’s perception

• Alter the Outcomes – Alter the negotiation process and potential results of the negotiation. This may include altering (for oneself of the counterparty) the interests at stake (mixed-motive or move to integrative situation), the objectives (target point and optimal outcome), the alternatives (the resistance point and ZOPA), or the need for adjustment or concessions.

• Cognitively Distort Inputs or Outcomes – If the negotiator is unable to actually alter the inputs or potential outcomes, she may seek to alter the counterparty’s perception of the inputs or potential outcomes. This may be done through any effort that affects the counterparties cognition, such as logic or emotion. For example, convincing the other party that common sense dictates an outcome or appealing to the counterparty’s emotion (through empathy or sympathy).

A negotiator who is unable to either remove or reduce the source of inequity (or the perception of inequity) in a situation, as influence by social comparison, may find it difficult to effectively negotiate a distributive situation.

What is the effect of mood and emotion in negotiations?

Negotiations create and are affected by positive and negative emotions. For example, a cognitive assessment of a “good outcome” leads parties to feel happy and satisfied. Negative emotions, on the other hand, can result from being turned off by the other party, feeling bad about the development of the negotiation process and the progress being made, or disliking the results.

Positive emotions generally have positive consequences for negotiations. They are more likely to lead the parties toward more integrative processes; to create a positive attitude toward the other side; to promote persistence in addressing issues and concerns in the negotiation; and to set the stage for successful subsequent negotiations. Positive emotions frequently result from procedural aspects of the negotiation process, such as fair procedures during negotiation or favorable social comparisons.

Negative emotions generally have negative consequences for negotiations. They may lead parties to define the situation as competitive or distributive; undermine a negotiator’s ability to analyze the situation accurately, which adversely affects individual outcomes; lead parties to escalate the conflict; or lead parties to retaliate and may thwart integrative outcomes. Procedural aspects of the negotiation (such as running into an impasse, or the anxiety of beginning a negotiation) can give rise to negative emotions, such as a competitive mind-set.

The above statements regarding emotion in negotiation are certainly not always true. Positive feelings may have negative consequences and negative feelings may create positive outcomes. A negotiator must be able to recognize and evaluate the effect of emotions on herself and the other party. Emotions can be used strategically as negotiation gambits. Given the power that emotions may have in swaying the other side toward one’s own point of view, emotions may also be used strategically and manipulatively as influence tactics within a negotiation. Negotiators may also engage in the regulation or management of the emotions of the other party.

What role does creativity play in negotiations?

Successful negotiation requires a great deal of creativity and problem solving. Creativity is an ability to ideate upon and come up with approaches or solutions to the issues or conflicts at the heart of the negotiation. Creative aspects of negotiation are often ignored or downplayed by negotiators, who fixate on the competitive aspect (fixed-pie perception). Creativity is chiefly important in the development of strategies (plans and objectives) and tactics. Some creative approaches to developing a negotiation strategies and tactics include:

• Incubation – This is one step in a process of problem solving (Preparation, Incubation, Illumination, and Verification). In this stage we do not actively address the conflict or dispute in question; rather, this period allows for unconscious processing of the situation. Basically, it allows an individual to internalize the situation at hand in order free up the ability to later ideate and effectuate resolutions. • Creativity templates – These templates allow for a rational approach to problem-solving. For example, a rational model might include: understanding the problem, devising a plan, carrying out the plan, and looking back. Another understood template model might focus upon fluency, flexibility, and originality in addressing a situation. Fluency is the ability to generate many solutions to a conflict. Flexibility is the ability to change approaches to a problem. Originality is the ability to generate unusual and unique solutions. • Brainstorming – This is a technique used to stimulate creativity in groups, in which the goal is to increase the quality and quantity of group ideas by encouraging free exchange and by removing criticism. • Convergent versus divergent thinking – “Convergent thinking” is a method that proceeds towards a single answer. “Divergent thinking” is a method of thinking about a problem that moves outward from the problem in many possible directions and involves thinking without boundaries, flexibility of categories, and originality of thought. • Psychological Flow – Applying deductive and inductive reasoning approaches. Deductive reasoning is the process of drawing logical conclusions from given information. People violate rules of logic on a regular basis by focusing on the conclusion and not the logic. This is also a tendency toward “confirmation bias”, which regards the practices of seeking or giving notice only to information that confirms or reaffirms one’s beliefs or understanding. In negotiation, confirmation bias causes individuals to discount or fail to recognize information (social or situations) that is relevant to the negotiation process. Deductive reasoning focuses upon cognitive consistency. “Inductive reasoning” is the process of hypothesis testing or trial and error from given information. It tends to be more focused on convincing or persuading others. Creative negotiations tactics to implement a given strategy might include the following:

• Fractionating – Breaking problems into solvable parts. This process allows for integrative possibilities – expanding the pie by adding additional interests and novel combinations of those interests. It also helps with “problem representation” – defining, rather than solving, a problem. This process is critical in the search for differences in a negotiation that will lead to creative trade-offs. • Finding differences: A creative negotiator searches for manners of aligning and realigning interests. Being able to align issues is important in fostering the ability to trade off independent issues.

• Bridging – This is a type of integrative solution in which a new option is created that satisfies both parties’ vital interests. The approach requires an understanding of the counterparty’s interests and a conscious avoidance of positional bargaining.

• Cost cutting – A tactic to make the other party feel whole by reducing their costs.

• Nonspecific compensation – An agreement where one negotiator receives what she wants, and the other is compensated (or paid) by some method that was initially outside the bounds of negotiation.

• Structuring contingencies – Contingency contracts are agreements wherein negotiators make bets based upon their differences in beliefs, forecasts, risk profiles, and interests. To be effective, contingency contracts require:

⁃ Continuity – Some degree of continued interaction between parties. ⁃ Enforceability – The terms of the agreement are enforceable upon the realization of a contingency. ⁃ Clarity and measurability – The determination of the contingency is readily achievable.

• Seeking feedback – This process includes seeking input from those involved in the negotiation regarding their perception or understanding of the process and outcomes.

Several biggest threats to creativity include:

• Inert knowledge problem – Inert knowledge concerns the inaccessibility of knowledge in one’s own mind because of initial encoding. It is marked by a dissociation between what is most accessible in our memories and what is most useful in problem solving and reasoning. In business, it concerns the limitations on the ability of managers to transfer knowledge from one context to another. “Transfer” is the ability to apply a strategy or idea learned in one situation to solve a problem in a different, but relevant, situation. Transfer can be further divided as follows:

⁃ “Surface-level transfer” is when a person attempts to transfer a solution from one context to a superficially similar one.

⁃ “Deep-level transfer” is when a person applies solutions and strategies that have meaningful similarities, rather than superficial ones.

Decreasing inert knowledge problem involves making an explicit comparison between two or more relevant cases.

• Availability heuristic (bias) – This is the principle stating that the more prevalent a group or category is judged to be, the easier it is for people to bring instances of this group or category to mind. A related concept is “false consensus effect”, which is the belief that others are more similar to ourselves in attitudes and behaviors than is actually the case.

• Representativeness – This is a heuristic based on stereotypes. Stereotyping is a phenomenon where, the more a person looks like the stereotype of a member of a certain group, the more we are inclined to categorize them as belonging to that group. Related concepts are base-rate and gambler’s fallacy.

⁃ “Base rate fallacy” is the tendency for people to discount perfectly valid information and instead rely on a single data point.

⁃ “Gambler’s fallacy” is the tendency for people to believe that a routine occurrence will even out. The error comes when they believe that a specific situation will occur because of these evening out when, in reality, all occurrences are independent. • Unwarranted causation – This is the tendency to attribute an outcome to a particular factor, when that factor is not the driving force or even related to the outcome. A related concept is “belief perseverance”, which is the tendency of people to continue to believe that something is true even when it is revealed to be false or has been disproved. This comes from individuals wanted a cause and effect to be true based upon other factors or influences. • Illusory Correlation – The tendency to see invalid correlations between events. This tendency is closely related to that of defensive attributions.

⁃ “Defensive attributions” enable observers to deal with perceived inequities and maintain belief in a “just world”. A just world belief is that everything will work out alright because of Karma.

⁃ “Blaming-the-victim attributions” are a related concept. This is the tendency to develop unwarranted, negative impressions of others who suffer misfortunes. This tendency is to enable observers to deal with the perceived inequities in others’ lives and maintain belief that the world is just. • Hindsight bias – Human tendency to be able to determine the process from an outcome, but unable to determine an outcome from the process or situation. A related concept is “creeping determinism”, in which we believe that outcome of a situation to be the natural and unavoidable consequences of the situation. • Functional fixedness – When we focus on known methods to solve and problem, but we are unable to employ other readily available problem-solving methods. A related concept is “set effect” (or negative transfer), which concerns how past experience can limit our ability to develop or employ new or alternative strategies. • Selective attention – The inability or unwillingness of an individual to see things holistically. Instead, the individual focuses on pieces of the situations that lead to a particular position or conclusion. • Overconfidence effect – Exaggerated confidence in one’s knowledge or ability or probability of a positive outcome.